00:00Here's a reminder of what Treasurer Jim Chalmers told us about the government's stance on U.S. trade threats at the G20 meeting in South Africa.
00:08We see these tariffs as self-defeating. We see them as an act of economic self-harm.
00:13We've made it really clear that we're not prepared to negotiate or diminish or weaken the PBS in order to get a deal.
00:20We've been clear about that from the beginning.
00:22Well, let's get some more on the outlook for trade and foreign policy under the second Albanese government with Meriden Varel, partner at the KPMG Australia Geopolitics Hub.
00:34Meriden, thanks so much for joining us today.
00:36Jim Chalmers also said that he views these U.S. tariffs as an act of self-harm.
00:41There's certainly a fair bit of confusion in Australia about why Australia has tariffs considering the trade surplus that Australia runs with the U.S.
00:49But never mind that, he also said what isn't up for reform, and that's the pharmaceutical benefits scheme, which promotes domestic production.
00:58I mean, is that something that Australia is going to have to talk about with the United States, and can it hold the line?
01:05It's a great question, and it's something that Australia will...
01:09It seems like both sides of Australian politics right now are pretty protective and determined to defend our PBS and our MBS.
01:18And I imagine that with that environment that we're hearing and seeing in Australia at the moment, that Australia will go in and determine to protect that should those 200% tariffs come any closer to us.
01:35Another thing that President Trump has been talking about is a desire to see Australia increase its defence budget to 3.5%.
01:41It's a policy one doesn't imagine would have tremendous domestic support.
01:46But Jim Chalmers says, look, the defence budget is going up, just not by that much.
01:51Is this another potential bargaining chip the government's going to have to deal with here?
01:54This question of defence spending has been something that the Australian security community has been talking about for many years, and 2% of GDP has been the kind of goal for many years.
02:08But there is no doubt, and this is the context that needs to be taken into consideration, the context is changing.
02:15The broader geopolitical environment is the worst it's been in a long time, and that security context is getting worse.
02:22So, from a national interest point of view, Australia has to ask itself, regardless of what the American administration wants us to do, what is best for us?
02:33And if we think that it is appropriate to increase our defence spending, then we need to make sure that we're having a national conversation with the Australian community to help them understand and explain why that is necessary.
02:46Because the general population wants to see money spent on health and education, social services, not on defence, unless they can understand that there's a reason.
02:55So, there's a really broader geopolitical context with this, as well as an Australian domestic politics context, and the Australian politicians in parliament are going to have to negotiate that, regardless of what the US administration wants from us.
03:13And looming large in the geopolitical context, of course, is Australia's relationship with China.
03:18How would you assess the recent visit by the Prime Minister to Beijing?
03:21That's also a really great question, because the feedback has been really positive.
03:27That he spent six days there, rather than the usual three, that he went to three cities, Chengdu as well as Shanghai and Beijing, all looks really positive.
03:36The engagement narrative, the idea that Australia is building resilience in the relationship with our greatest and most important trading partner, is really positive and really important.
03:47Because in this broader, rapidly changing geopolitical landscape, we have to make sure that we are keeping our friendships and our relationships strong with everyone that we need to.
03:59It can't be a zero-sum game where we increase our relationship with one at the expense of another.
04:06Australia is a very exposed trading nation.
04:09We rely on good trading relationships, among other things, for our prosperity.
04:14So it's essential.
04:15It's pragmatic that we need to try and maintain a pragmatic relationship with our greatest trading partner.
04:22How do multilateral frameworks like AUKUS, for example, fit into here?
04:26So AUKUS is a small multilateral grouping, and what it means is that Australia, the UK and the US are working together to try and improve the security of globally, as well as for each of the actors within it.
04:44So in terms of that broader geopolitical context, it's a very difficult and sensitive issue to navigate, because we need to be concerned and thinking about our defence and security situation, but at the same time, we need to be building those relationships.
05:00So it's like a horse rider trying to ride two horses at the same time.
05:04Australia is the rider.
05:05We have two horses, the US, our security partner, and China, our trade partner.
05:10And we need to be able to try and navigate those two relationships at the same time.
05:14And it's becoming increasingly complicated because of that bigger geopolitical picture.
05:19Yeah, at the moment, there's questions over the reliability of the United States as a trade partner.
05:24But it wasn't that long ago there were the same possibly worse questions about China when we consider the number of trade strikes that China levied against Australia.
05:32Do you feel like the lessons of the past have been learned when we look at all the smiles that came out of Anthony Albanese's trip to China last week?
05:41Look, I certainly hope so.
05:43I hope that we're not going and considering that everything is roses and that everybody's buddies.
05:50We cannot return to the status quo ante.
05:53And if we think we can, then we are being naive and we are being complacent.
05:58The reality has changed.
06:00It will not be going back.
06:01And we have to navigate that reality.
06:03It's much more complex than it has been for decades.
06:06So we need to build a pragmatic relationship.
06:09We need to try and extricate politics from economics with our relationships.
06:16That's extremely difficult considering the way that trade and economics and investment are being weaponised.
06:21So the Albanese government or whoever is in government in Australia is going to have a very difficult time now and into the future of navigating that complexity.
06:30And we need to play it very carefully.
06:33All right.
06:34Meriden Varel, partner at KPMG Australia Geopolitics Hub.
06:37Thanks so much for joining us.
06:38And we'll have more on Australia Ahead every Tuesday, 11.40 a.m. if you're watching in Sydney.
06:44And that is 8.40 a.m. in Hong Kong.
06:48Also, you can tune into the Bloomberg Australia podcast, which delves into the biggest stories shaping the country's role in global business.
06:55You can find it on Apple, Spotify or Bloomberg.com.
Be the first to comment